As every other aspect of San Antonio’s produce industry has grown exponentially, so has the supermarket landscape.
With the city’s population at 1.5 million and growing, retailers have no choice but to expand and evolve to compete for shopper loyalty and dollars. From local and regional stores to big national chains, the city offers a venue to please even the pickiest palate.
Hometown favorite and privately held H-E-B tops the list of retailers. With upwards of $20 billion in annual sales, the San Antonio-based chain has 340 stores across Texas and Mexico, making it the number-one retailer in the state. It also made the list of top 20 retailers in the United States for the first time in 2017.
As of early 2018, H-E-B controlled nearly 60 percent of the South Texas market, which includes San Antonio as well as Austin, Corpus Christi, Laredo, McAllen, and Brownsville. In second place was Walmart with about 27 percent of the market, followed by retailers and wholesalers like Albertson’s, Grocer’s Supply, Whole Foods, Sprouts, Trader Joe’s, and Lowe’s.
But reaching and retaining the top retailer spot in such a competitive market requires more than just stocking shelves. To that end, H-E-B has embraced innovation and expansion. In February 2018, the company acquired Favor, an Austin-based delivery service, and tapped CEO Jag Bath to be its new chief digital officer.
There’s even talk of plans to build an 81,000-square-foot technology lab in East Austin to serve as Favor and H-E-B’s digital headquarters.
In late 2018, H-E-B launched a beta version of a technology known as “frictionless checkout” through its H-E-B Go app, allowing shoppers to scan groceries at a designated terminal and pay through a stored method on their phones.
According to some reports, the entire checkout process with the app, which is available for Apple and Android phones at a handful of stores, takes a mere 10 to 15 seconds. If it proves easy and convenient for busy consumers, watch for continued expansion.
As if that weren’t enough, H-E-B also broke ground in November on a 1.6 million-square-foot warehouse in what will be a comprehensive, 871-acre development on the city’s east side. Completion of the warehouse is slated for late 2019, with the entire complex open for business in 2020.
Jay Smith, general manager of San Antonio-based Texstar Produce, a potato shipper and repacker, has only praise for H-E-B. It’s not just that the retailer is his biggest customer, it’s the way the grocer does business.
Smith cites an example of an H-E-B buyer he used to work with who was happy to meet with Texstar growers when they were in town and offer a tour of H-E-B’s warehouse to help bridge the gap between retailer and grower.
Smith calls H-E-B’s approach to retailing “progressive” with plenty of transparency. The company is also “open to new ideas and input, and that’s really something.”
While H-E-B may be the top dog in town, there’s plenty of competition nipping at its heels, especially when it comes to the digital grocery shopping space.
Walmart, for example, expanded its grocery delivery service in San Antonio by partnering with Postmates last summer. About the same time, Amazon extended the reach of its PrimeNow delivery service to the city’s Whole Foods Markets. In addition, Austin-based urban market Royal Blue Grocery announced it would open its first San Antonio location this year.
Meanwhile, no-frills discount German grocer Lidl appears to have put its ambitious plans for the San Antonio market on hold. In the summer of 2017, the chain, which is one of the world’s largest grocery retailers, opened its first 20 stores in the United States.
Then the company went on a San Antonio shopping spree. Citing plans for an aggressive expansion across the country, Lidl bought a 4.2-acre tract on the city’s east side in August 2017 and 5-plus acres in a planned retail development northwest of downtown a month later. Then in November 2017, the chain purchased another 5.6 acres on the northwest side, not far from both an H-E-B and a Walmart.
More than a year later, the three sites in San Antonio remain empty, and Lidl appears to be less of a disruptor than initially anticipated. One reason noted by industry insiders is that other retailers have lowered prices to remain competitive, and Lidl has struggled to keep up. For now, its efforts to take over this particular market have sputtered.
This is an excerpt from the most recent Produce Blueprints quarterly journal. Click here to read the full version.
